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Commodity Market Financialisation: A Closer Look at the Evidence

Author

Listed:
  • Alexandra Dwyer

    (Reserve Bank of Australia)

  • James Holloway

    (Reserve Bank of Australia)

  • Michelle Wright

    (Reserve Bank of Australia)

Abstract

There is some debate about whether financial investors have caused excessive increases in the level and volatility of commodity prices. These investors are viewed by some as being less concerned with fundamentals than traditional market participants and hence impeding the price discovery process – that is, they are destabilising speculators or ‘noise traders’. This article discusses the relationship between the futures markets for commodities (where financial investors are most active), and the spot markets. It then argues that the evidence does not support the hypothesis that financialisation has been the main driver of commodity price developments in the 2000s.

Suggested Citation

  • Alexandra Dwyer & James Holloway & Michelle Wright, 2012. "Commodity Market Financialisation: A Closer Look at the Evidence," RBA Bulletin, Reserve Bank of Australia, pages 65-77, March.
  • Handle: RePEc:rba:rbabul:mar2012-08
    as

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    File URL: http://www.rba.gov.au/publications/bulletin/2012/mar/pdf/bu-0312-8.pdf
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    References listed on IDEAS

    as
    1. repec:hrv:faseco:33077905 is not listed on IDEAS
    2. Renee Fry & Callum Jones & Christopher Kent, 2010. "Inflation in an Era of Relative Pirce Shocks," CAMA Working Papers 2010-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Yasunari Inamura & Tomonori Kimata & Takeshi Kimura & Takashi Muto, 2011. "Recent Surge in Global Commodity Prices-- Impact of financialization of commodities and globally accommodative monetary conditions --," Bank of Japan Review Series 11-E-2, Bank of Japan.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Philipp Adämmer & Martin T. Bohl, 2015. "Price Discovery in European Agricultural Markets: When Do Futures Contracts Matter?," CQE Working Papers 4415, Center for Quantitative Economics (CQE), University of Muenster.
    2. Bernardina Algieri, 2014. "A roller coaster ride: an empirical investigation of the main drivers of the international wheat price," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 459-475, July.

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